Many point to the recent climate conference (COP27) as a ‘quiet’ conference, but it is far from the case. Once every five years, the countries are required to update the goals in their national plan for reducing greenhouse gas emissions (Nationally Determined Contribution – NDC). The last update was at the COP26 conference, but this conference marked the need to move away from regular cycles, in light of the urgent need to follow the actions that will ensure a warming of 1.5 degrees Celsius and no more.
According to the final agreement, governments are required to update their NDC by the end of 2022, in preparation for COP27. Since 2021, only 21 countries have submitted an update to their NDC, 19 of which have come from developing countries (is this a sign of increased involvement by developing countries?). While there has indeed been a continuous increase in zero carbon emission commitments announced during 2022, it seems that the need for an update every five years has not been fully maintained and therefore there is doubt as to whether we are heading in the direction of a war on global warming. We are in the 90th minute.
The urgency to have an annual action plan stems from the understanding that a difference of only half a degree (between an increase of 1.5 Celsius and 2 Celsius) will cause a tremendous worsening of the climate situation – here are some examples:
* An ice-free summer in the Arctic Ocean region will occur at least once every ten years instead of once every century.
* 14% of the world’s population will face an extreme heat phenomenon at least once every five years, an increase of one and a half degrees compared to more than a third if the increase is more extreme.
If you want to specialize in the capital market and have a big head and motivation, you can be a good fit for us.
The job can be part-time; flexibility in working hours; Work from home too.
Preference (not mandatory) for writing experience and basic familiarity with the capital market.
Leave details and we will get back to you
Thank you for leaving details, we will try to get back to you as soon as possible
* The number of people suffering from water shortages will be 50% lower in the scenario of a 1.5 degree increase compared to the alternatives.
The world has already warmed by about 1.1 degrees Celsius since the pre-industrial revolution and according to calculations we have less than 10 years left to limit warming to 1.5 degrees Celsius. According to the IPCC, the global carbon budget (the cumulative amount of carbon dioxide emissions estimated to be able to maintain the Earth’s surface temperature at some desired level) will run out at the end of 2030, leaving only one more “peak” of the COP meetings before 2030 In light of this, we must move from five-year action cycles to annual events.
The fact that the conference took place in an African country placed the continent’s climate needs on the agenda. Africa in particular, but also other emerging markets, were in the spotlight both as recipients of funding but also as providers of investment opportunities that could trigger the stagnation in the climate fight. In the term climate finance, we refer to those funding sources that seek to support greenhouse gas reduction and adaptation actions to address climate change, which were, as mentioned, the focus of discussions when natural capital is seen as a pillar in both mitigation and adaptation efforts.
Throughout several climate conferences, the parties established financial mechanisms designed to finance climate change activities. Article 9 of the Paris Agreement states that developed countries will provide financial resources to assist developing countries with both mitigation and adaptation needs. The annual commitment of 100 billion dollars on the part of the developed countries, established in 2015, has not yet been achieved and it is clear that the discussions need to move forward as the current market circumstances certainly do not accelerate access to financing the fight against warming.
Most public funding for developing countries goes to projects that reduce carbon emissions, as opposed to helping people adapt to climate change that has already occurred. Furthermore, according to the UNEP Adaptation Report both remain significantly underfunded. However, developed countries ignore how their domestic policies can affect the competitiveness and affordability of various climate solutions elsewhere in the world. For example, the cost of solar panels in the U.S. “B can affect the access and cost of those panels in India.
Previous COPs have examined the continuation of fossil fuel subsidies. But the same concern for energy independence and the ability of those countries to provide their own energy can directly harm global efforts and the need to combine forces to carry out the climate change policy.
However, the policy of the developed markets to expand the use of renewable energies (for example, Biden’s plan to invest 396 billion dollars in such energies) and pressure for local production at any cost, can harm developing policies by reducing their purchasing power in relation to renewable energies. In short, the subsidies in the North for the transition to renewable energies lead to a delay in the transition of energy in the countries of the South.
The example of the subsidies demonstrates two aspects: first, how important is the cooperation between governments on the global issue of climate change – or in other words, how valuable the COP discussions can be when both developed and emerging markets jointly examine the effects that subsidies can have around the world. Second, the important role of private financing in developing markets to help transition to energy sources or other solutions.
If Africa is at the center, then the continent’s adaptation to climate change has come up a lot on the agenda considering the extensive dependence of the African economy on activities that already feel the impact of climate change: the presence of agriculture in Africa and its direct exposure to physical climate risks – 23% of sub-Saharan Africa’s GDP comes from agriculture and more More than 60% of the sub-Saharan population are smallholder farmers.Additionally, in sub-Saharan Africa, 95% of agriculture relies on rainfall as opposed to irrigation, combined with these countries being the main contenders with some of the highest droughts in the world.
Africa is a clear example of the double effects of climate change; First, the direct exposure to physical risks (such as heat waves and drought) is greater than the global average and second due to the lack of funding to build resilience and the ability to deal with those climate changes (adaptation). Insurance is a key area in adapting to the climate, not only by providing an element of resilience to the agricultural sector but also by reducing risks and increasing the ability of the banking sector to provide solutions for a large variety of entrepreneurs and their businesses.
Current estimates indicate that the annual costs of climate adaptation in emerging economies could reach $330 billion in 2030 (according to the UNCTAD Trade and Development Report) while the Glasgow Climate Agreement’s definition of adaptation is “helping those already affected by climate change”. These two statements demonstrate the double action required between the funding needed for future climate change and the immediate funding required by many who are already facing the dangers of climate change—knowing that the impact of climate change could threaten the livelihoods of entire communities in the most fragile economies and in the most vulnerable sectors, such as agriculture.
Natural capital (a collection of natural factors or ecosystems) is a key component of climate finance, helping both adaptation and mitigation actions. Nature-based interventions can help reduce carbon, usually at a much lower cost than engineered solutions, and provide a more holistic strategy towards zero emissions. COP27 discussed this holistic approach in more detail compared to previous COPs when talking about both natural capital as a climate solution, but also how nature is already affected by climate change.
Countries such as Gabon and Nigeria have pledged to generate credit in the carbon market (which is an incentive to reduce emissions) with some already sold in what will be the largest issuance in history. So it is clear that the African carbon market is moving fast in conjunction with the United Nations Framework Convention on Climate Change (UNFCCC).
Many areas with high exposure to natural habitats contribute significantly to GDP in markets in developing countries, for example, forestry contributes up to 30% of national exports for some African countries, while tourism, another key industry, also depends on natural assets. Schroders recognizes the importance of natural capital and shared Working with Conservation International to accelerate natural climate solutions in Southeast Asia Specifically, within Africa, integrated financing is high on the agenda, with entities such as British International Investment, Norfund and Finnfund following through on COP26 pledges to increase the proportion of sustainable forests in Sub-Saharan Africa by investing in various platforms that impact Africa’s forests.
Climate finance flows between developed and developing countries will remain limited due to the lack of public funding. To meet Africa’s climate finance needs, the private sector will have to play a more prominent role. Mobilizing investment in climate solutions in Africa, and other developing countries, will require innovative financing structures to overcome current financial barriers.
Maria Teresa Zaffia and Holly Turner are economists at the British investment giant Schroders